Oil and natural gas daily review (July 09, 2014)

Oil prices continued its decline for consecutive second session in a row as Libyan oil exports looked likely to rise and fears eased of supply disruption in Iraq. Libya's 340,000 barrel per day (bpd) El Sharara oilfield has resumed operations after a four-month strike and this may free more oil for export after last week's port deal with rebels.

In Libya, preparations were under way to reopen two major oil ports in the east. Shut by protests almost a year ago, the Ras Lanuf and Es Sider ports make up more than a third of the OPEC producer's export capacity.

API inventory update

The API released its weekly inventories report last night and US crude oil inventories declined by 1.7 million barrels for the week ending on 4th July 2014. Gasoline stocks rose by 0.112 million barrels whereas distillate inventories fell by 0.522 million barrels for the same time period.

EIA inventory forecast

The EIA is scheduled to release its weekly inventories report tonight at 8:00pm IST and US crude oil inventories is expected to decline by 2.2 million barrels for the week ending on 4th July 2014. Gasoline stocks are expected to decline by 0.2 whereas distillate inventories are expected to increase by 1.2 million barrels for the same time period.

Natural Gas

U.S. natural gas futures ended down by 0.24 percent on Tuesday after falling to the lowest in six months earlier in the day on forecasts for continued cooler-than-normal weather and expectations for another big storage build.

On the MCX, NG prices declined by 0.75 percent and closed at Rs.251.60/MMbtu

Outlook

On an intraday basis, we expect crude prices to trade lower as resumption of Libya’s exports have eased supply constraints in energy markets. Besides, the Iraq situation has also eased down a bit acting as a negative factor for prices.

Meanwhile, the inventory report due to be released by the EIA tonight will provide further direction to crude prices.

On the MCX, crude prices are expected to trade lower in line with weakness in international markets.